Friday, September 28, 2012

I thought I would be middle class... but I think I was wrong


What is a social safety net? In other countries, people subscribe to the concept of domestic social programs because they  believe that society benefits when its weakest members are taken care of in the most basic way. They pay taxes knowing they, too, will benefit from the system.

For four and a half years I worked as a researcher at a Dutch University. At the time of my last paycheck in 2008, I made 2,558 Euros ($3,990) per month*. I paid 24% of my 2558 Euros in taxes, 0.05% in accident and life insurance, 7.9% in pension and 1.4% in social insurance. I paid 166.97 Euros in health insurance for my family per month, which was refunded in full by my employer. That’s right. I paid no health insurance costs. 

To be perfectly honest, I gladly paid a high tax rate because the benefits were enormous.

As a full-time University professor in Connecticut my gross paycheck is roughly the same. (As a side note, it would be illegal in the NL for me to be paid the same rate after finishing my degree as I was paid before, but... alas... in the competitive American system this is the salary I make). 

 I spend 1.1% on life and accident insurance and 18.8% in health insurance and on a tax-free health spending account. 12.6% of my paycheck goes to a tax-free childcare account. In addition, 3.8% of my income goes to social security and 5.0% into a retirement fund. In contrast to the Dutch system, I pay few taxes in the US, a mere 2.2% of my gross income and all at the state level. No federal tax is withheld from my paycheck. In the Netherlands, I kept 66% of my earnings; in the US I keep 56%. I make the same, but I have far less to show for it.

What were the benefits of my 24% Dutch tax rate? 
My family never paid deductibles, out of pocket costs, or from a health savings account for any medical treatment, doctor’s visits, or prescriptions, including all costs associated with the birth of two children. 
I didn’t need a child dependent care account because the cost of childcare, subsidized by a government that recognizes the benefit of women working, was not as exorbitant as in the US. In Connecticut, daycare for a toddler is $300 per week. I have two kids. Before they were both school-aged, their care at the full rate would have exceeded my salary. But we're lucky. Our family income was so low that our daycare was subsidized by a state-level program. For many women the option of continuing to work after having kids is not really a choice. 

I had four months of fully paid leave with each pregnancy. After my kids were born a "mother's helper" came to our house for 5-7 hours a day for a week. Paid fully by our insurance, she checked the health of the baby and mother, helped troubleshoot breastfeeding, cleaned the house, took care of older siblings, made dinner and went grocery shopping for me. Yes, it was a nice benefit for a new mom, but it was also (thinking about a society here) a GREAT way to insure new mothers are educated about nursing, care, and nutrition. It also allows a level of care for both mother and child in the critical first week of the baby's life. 

Parents of young children also received small quarterly child assistance payments in the Netherlands of a few hundred Euros. 

I also had a “thirteenth” paycheck, split between a vacation bonus (to spend during my six weeks of paid vacation per year) and an end of year bonus. 

In the Netherlands I enjoyed a healthcare system with a lower infant mortality rate than our own. There was inexpensive, convenient public transportation that allowed me to live car-free. If my children had grown up in the Netherlands and attended University, the government would cover the costs and provide a living stipend. In contrast, I meet US students every day who take out massive loans for an education with few guarantees of employment. My husband and I cannot afford to save for our children’s education.   

What do people who do pay taxes in the US get for it? (Remember, I don’t pay any federal taxes). A federal budget of 3.6 trillion dollars,roughly 20% of which is spent on defense. While not unimportant, would we be as safe if we spent 10%? Especially considering we spend five times as muchas the next-highest-spending country. In fact, we spend 200 billion more dollars than the nine next-highestspending countries combined. (Would it surprise you to learn that the defense industry spent 66 million dollars in lobbying in 2012?)

While we enjoy many social services in the US, our programs are skewed to benefit older Americans (SocialSecurity and Medicare make up 33% of the budget) as opposed to the poor. Medicaid,CHIP (the Children’s Health Insurance Program), and our entire safety netcombined make up roughly 20.8% of the budget. Education makes up just 2% of the budget. Our social safety net includes child and earned-income tax credits, Supplemental Security Income forthe elderly and disabled, unemployment insurance, low-income family benefitslike food stamps, school lunch and breakfast programs, housing, child-care andenergy bill assistance, as well as benefits for abused and neglected kids. Am I wrong in thinking these things are a good idea? (Budget data here.)

America is the land of financial opportunity. For many, a solid middle-class existence has disappeared. It’s easy to blame others in our system, to say that it’s the fault of the poor, the uninsured, the jobless, and the uneducated. But I would argue that we fail to recognize that what separates “us” from the poor, the uninsured, the jobless, and the uneducated is quickly disappearing.

I did not become a college professor for the money. I did it because I wanted to teach and conduct research. I also thought it would mean a middle-class life. Was I wrong? 

On a balance sheet I can see how the countries compare, but there is something that cannot be captured by my calculations: the safety of a middle-class existence, which I have not felt since leaving the Netherlands.

What do you think?

Is the middle class disappearing in the US?

What's the answer?


*This is the conversion at the 2008 rate. It would be slightly different now, but it made sense to depict the figure in 2008 dollars. 

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